By Denise Scoville-Glackin. Offering an employee stock purchase plan provides your company with the opportunity to implement a broad-based equity program that is a benefit to all employees. An ESPP is an attractive opportunity to employees – from the discounted stock purchase price to the simplified enrollment through pre-determined payroll deductions. Implementing an ESPP offers significant value to employees and there are 5 reasons why your company should consider designing a plan today.
1. Increase employee motivation across all company levels: A qualified 423 ESPP plan that includes an attractive 15% discount with a look back feature and a long offering period of 24 months is an effective way to spark employee motivation – and also increase the tax effectiveness of an employee benefit!
2. Attract and recruit top level professionals: ESPP plans are a great motivation tool for your current work force, but don’t underestimate the recruiting element. Adding in a plan that offers a good discount and look back provision will be quite attractive to potential employees as well.
3. Simpler shareholder approval: If obtaining shareholder approval is challenging at your company, you may consider offering a smaller discount with no look back feature. The fact remains that the employee will be a shareholder and still benefit from the discount!
4. Strengthen your company’s ownership culture: Be sure to communicate to employees that participating in the company’s qualified 423 ESPP plan will enable participants to become shareholders. There is also the option of adding in a restriction of when the employee can sell their shares to encourage long-term stock ownership.
5. Allow for creative ways to offer additional equity: Speaking of long-term benefits, it may also be beneficial to consider a non-qualified ESPP plan that offers matching restricted stock that vests at a minimum of one year after purchase date. Not only will this encourage stock ownership, but there is a bonus to participants as well – more shares!
Worried about the administrative burden? Consider investing in an ESPP software solution to support the administrative and financial reporting requirements. Design a plan to meet the needs of the company, the employees, the accounting folks, and the administration team. Both a qualified 423 ESPP and non-qualified ESPP offer great benefits. (Read about different types of ESPP programs in this blog post). Be sure to research your employee stock purchase plan design options, consider your employee base and local environment, and evaluate your company’s administrative resources to ensure there is the bandwidth to support the plan.